Question

A man borrows ₹6,000 at 20% compound rate of interest. At the end of each year, he pays back ₹2,000. How much money should he pay at the end of the third year to clear all his dues?

• A. ₹5,088
• B. ₹4,088
• C. ₹5,588
• D. ₹4,588

Answer 1

The correct option is A ₹5,088

Total debt amount after 1 year
$=P+\frac{P\times R}{100}$
$=6000+\frac{6000\times 20}{100}$
$=6000+6000\times \frac{1}{5}$
$=₹7,200$

Debt left over after payment at the end of 1st year $=7200-2000=₹5200$

Total debt amount after 2 years
$=P+\frac{P\times R}{100}$
$=5200+\frac{5200\times 20}{100}$
$=5200+5200\times \frac{1}{5}$
$=₹6,240$

Debt left over after payment at the end of 2nd year $=6240-2000=₹4,240$

Total debt amount after 3 years
$=P+\frac{P\times R}{100}$
$=4240+\frac{4240\times 20}{100}$
$=4240+4240\times \frac{1}{5}$
$=₹5,088$

Money to be paid to clear of the debt at the end of 3rd year $=₹5,088$